2012 Year-in-Review: Emerging Technologies in Payments

As 2012 nears its end, this is a good time toreflect on emerging-technology developments from the previous 12months. With that in mind, the following are the three mostsignificant items of the year:

3. U.S. EMV Conversion Roadmaps Announced andStartedAlthough Visa announced its EMV roadmap in August 2011, the otherthree major U.S. card networks did not announce their plans untilthis year. MasterCard announced its intentions January, Discover inMarch, and American Express in July. In addition, both MasterCardand Visa’s first steps, providing PCI relief for early convertingmerchants, was implemented on Oct. 1. Although merchants this yeardid not experience significant effects of the beginning of thisconversion, what the changes mean for the future are enough tomerit mention on this list.

2. Non-NFC Mobile Payment AppsIn 2012, both Google and Isis struggled to establish theirmobile-payment products. Google’s initial Wallet launch wasdisappointing and Isis was forced to delay its tests in Austin andSalt Lake City from the summer until October. However, mobilepayment solutions not based on Near Field Communication are growingquickly. Starbucks now processes 2 million mobile transactions eachweek, which as of November includes Square Wallet-based payments.LevelUp just surpassed 500,000 users. Dunkin’ Donuts launched amobile payments app, and Burger King is testing its own. While muchof 2011 was spent anticipating the promise of NFC, 2012 was spentdisplaying the value of NFC’s alternatives.

1. mPOSAmerican Banker recently named Jack Dorsey its “Innovator of theYear,” and with good reason. Dorsey’s Square has revolutionized thecard-acceptance market, particularly for merchants who werepreviously too small to afford standard point-of-sale terminals.After Square paved the way, dozens of competing products wereintroduced, including offerings from companies such as VeriFone,PayPal, Intuit, and Groupon. In addition to these, a number ofsolutions have been introduced outside of the U.S., includingchip-and-PIN capable devices. The market’s growth also is seen inthe quantity of payments these products are handling. Square aloneis processing transactions at a rate of $10 billion per year, upfrom $2 billion only 13 months earlier. mPOS makes it possible forall merchants, even the 15-year old baby sitter, to acceptcard-based payments. This is a value that will not quicklydisappear.

So what will this list look like at the end of 2013? Most likely,it will look very similar. mPOS expansion will likely slow down inthe U.S., both in new solutions and transaction volume growth,however opportunities exist abroad. Issuers will start providingtheir customers with chip cards, although the major conversion ofPOS terminals won’t take place for a few more years. And, in thewake of Starbucks’ success, more retailers will start to developtheir own mobile payment apps, resulting in continued growth ofnon-NFC mobile payment apps. The only question is whether NFCsolutions can make more significant accomplishments. With 2013 lessthan a month away, we will begin to find out soon enough.

During the past twelve months there has been an ongoing acceleration in the pace of collaborative efforts on the part commercial banking institutions, networks and various fintech entities, to provide…

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